6.4 Planning Bills and Two-Level Master Scheduling

Quick Answer: A planning bill of material is an artificial parent that is never built. Its components carry option percentages that sum to 100% within each option group, so you forecast a handful of options instead of hundreds of configurations. Two-level master scheduling puts the family at level one and the options, modules, and common parts at level two — and you overplan the options, never the parent.

Why Assemble-to-Order Breaks Finished-Goods Master Scheduling

A configured truck offered with 3 engines, 4 trim levels, and 5 colors yields 3 x 4 x 5 = 60 sellable end configurations. Add two transmission choices and it becomes 120. Master scheduling those as end items means 120 item masters, 120 forecasts, 120 safety-stock decisions — for a product assembled from only 3 + 4 + 5 + 2 = 14 option items plus a common base.

Two things fail when you schedule at the configuration level:

• Forecast error explodes on disaggregation. "We will sell 1,000 trucks next month" is a stable number. "We will sell 43 red six-speed premium units" is noise. Every level of mix detail you add multiplies the error you must buffer.
• You cannot stock 60 finished goods. In assemble-to-order (ATO) the customer decoupling point sits at the module level. What must be on hand is options and common parts, not finished units.

So you master schedule what you can actually forecast — total family volume and option mix — and let the final assembly schedule build the specific configuration after the order arrives.

The Planning Bill of Material

A planning bill of material (also called a planning BOM, pseudo bill, or super bill) is an artificial grouping of items in bill-of-material format used to facilitate forecasting, master scheduling, and material planning. Its defining properties:

• The parent is non-buildable. It has no routing, no inventory, no part you can ship. It exists to carry a forecast.
• Component quantity per is a percentage of the parent (0.60 means 60% of family units take this option).
• Percentages sum to 100% within each option group, because every unit takes exactly one choice from the group. They do not sum to 100% across the whole bill — one truck takes one engine and one transmission and the common base.

Modularization is what makes any of this possible: engineering restructures the product so each customer choice maps to one module and everything shared collapses into the common parts bill. Commonality is separated deliberately — common items have volume risk only, option items have volume and mix risk, and the two deserve different planning treatment.

Two-Level Master Scheduling

Separating them is the entire point: you can be wrong about mix without being wrong about volume, and you can correct mix without renegotiating the production plan.

Worked Example: A 1,000-Unit Family Plan

Family forecast is 1,000 units per month. Option group A (engine): A1 60%, A2 30%, A3 10%. Option group B (transmission): B1 70%, B2 30%. Common parts bill: 100%.

Adding Option Overplanning

Mix percentages are averages, and real orders will not obey them. Option overplanning hedges mix by inflating the option quantities while leaving the parent untouched. Overplan each option by 20%:

The options now sum to 1,200 while the family plan holds at 1,000. That is not an arithmetic error; it is the design. You are buying the right to sell almost any mix up to 120% of plan in each group while committing final-assembly capacity, common material, and cash for only 1,000 units.

Test it. If actual orders arrive at A1 55% / A2 25% / A3 20%, then A3 demand is 200. Base planning supplied 100 and you would be 100 short; the overplan supplied 120, so only 80 becomes an expedite — and the A1 surplus (720 planned against 550 sold) cushions the next period.

Overplanning percentages need not be uniform. Set each one from the volatility of that option's historical share, its unit cost, and its lead time: a cheap, short-lead trim ring may justify 30%, while a $900 engine variant justifies 10%. The exposure is real money — 20% on 1,000 units is 200 extra engines and 200 extra transmissions each month, or 200 x $900 + 200 x $400 = $260,000 of option inventory carried purely to absorb mix uncertainty.

Never Overplan the Common Items

Every unit consumes the common parts bill, so common items carry no mix risk — their only uncertainty is volume, which S&OP already owns. Setting the common bill to 120% quietly does three damaging things:

• commits material for 1,200 units when the approved production plan is 1,000;
• inflates rough-cut capacity load and long-lead purchase commitments one for one;
• converts a mix hedge into an unapproved increase in the production plan.

This is a named exam trap. Overplan the options; hold the common parts bill at 100%.

Available-to-Promise at the Option Level

Because no finished configuration is stocked, available-to-promise (ATP) in an ATO environment is calculated on options, modules, and common items rather than on an end item. A configured customer order consumes ATP from every constituent it uses, and the promise is set by the scarcest constituent.

Order: 40 units in week 5 with engine A2 and transmission B2. Week-5 ATP is common 200, A2 = 55, B2 = 30. You can promise 30 in week 5; the other 10 wait for the next B2 receipt or trigger a capable-to-promise check on final assembly capacity. A healthy level-one plan of 1,000 units never rescues a depleted level-two option — which is exactly why mix protection lives at level two.